You’ve got a great idea for a business, and you’re raring to go! You know you can make it work, and quite possibly make a great deal of money with your start-up, and you want nothing more than to start ordering business cards and rounding up investors. That enthusiasm is part of what makes you an entrepreneur, but this is when you need to stop, take a deep breath, and make a comprehensive action plan for getting your business off the ground. Many ventures have failed despite being based on what should have been perfectly workable ideas, simply because the people behind them didn’t pause for thought, but just plunged in; full of drive but lacking the necessary planning that forms the foundation of a successful business.
Is your idea truly viable?
The world is full of ideas, and the progress of the human race depends on people coming up with new concepts and innovations. However, having what seems like a sure-fire notion that will make you a stack of cash is no guarantee that your business is realistically viable. This is where you need to do your research. First of all, you need to find out whether anyone else is offering what you plan to. If they are, how is your idea better than theirs, and what sets your offer apart from possible competitors? If you’re entering an already crowded market, you need to be able to give customers something new and different, an angle that makes you irresistible to prospective clients. You need to do thorough searches online and in your local area to see what is already available. For instance, you could have a grand idea for a new coffee shop in your local town, but if there’s a Costa or Starbucks up the street, how are you going to compete?
Protecting your ideas
If you’ve come up with a new product or scheme that hasn’t been seen before, are you able to retain your intellectual property rights so that other businesses can’t just copy what you’re doing? You might need a patent, and if you’re selling overseas, you’ll want to protect your rights in other countries too. Without protection, your business could fail simply because a larger company produces its own version and sells it for less, which is a frustrating and disheartening situation to be in. It’s a good idea to engage an attorney who specializes in patents and copyright to protect yourself from any infringement by other businesses.
Do customers want your product or service?
It might seem like the best idea in the world to you, but will anyone pay money for your product or service in the real world? The only way to be sure is to conduct some market research. You can employ an agency to carry out the study, or if you have sufficient expertise and time you can do it yourself, but it must be thorough and adhere to the recognized standards for quality research. It’s pointless carrying it out if your results are biased or incomplete, as you won’t get an accurate picture of what people think. The research requires groups of volunteers to try what you are offering and give their feedback on the product or service and whether they would be prepared to pay for it. Unless you can be sure that there is a sufficiently large market for your business, you could risk investing a lot of money, time and effort into a project that never had a realistic chance to make a profit.
Talking of profits…
As part of your business plan, you must create a budget and financial forecast that details how much your business would make over the coming three to five years. No-one expects a business to become profitable in the first couple of years; that time is all about building your presence, creating your brand, and bringing in the first customers. There could be a heavy burden of investment to start paying back, and the initial costs of setting up to cover. However, once the business has become established, you should start to see the profits increase. Before you start your business, you need to be sure that your idea is truly profitable. That means examining the costs of running the business and providing the service or purchasing the stock and comparing this to how much each sale will bring in. The crucial calculation is the overall profitability. You could be making a million dollars a year in revenue, i.e., money paid to you by clients, but if your outgoings are close to a million too, your profit, i.e., what you get to put in your pocket at the end of each month, will be virtually nil.
Check your personal finances too
Business and personal finances should, of course, be separate, with all incomings and outgoings related to the business being recorded and accounted for. However, as a prospective start-up, you will need the support of banks, lenders, and investors, who will all want to be sure that not only is your business idea likely to succeed, but that you aren’t going to be a credit risk. That means getting your personal finances in order. If you have any debt, loans, a poor credit rating, or any other concerns about the state of your financial history, find out what steps you can take to improve your situation, by getting advice from a reputable financial broker such as Bonsai Finance. The more stable your finances and the better your credit rating, the more likely you are to be able to secure loans and investments for your start-up.
It might sound like an awful lot of work when all you want to do is get stuck into the fun parts of being an entrepreneur. What you need to remember is that unless the groundwork is completed methodically and comprehensively, you risk failure in your venture. It’s like building a house on sand; it might look like a beautiful building, but if it lacks a solid foundation, it’s likely to topple over at any minute. Your business needs a solid foundation too, and that’s the secret to success.